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Financial paucity:
- Most of the income generating taxes is levied by the union and state governments and, the taxes collected by the urban bodies are not sufficient to cover the expenses of the services provided.
- The urban local government heavily depends on the state governments for getting grants-in-aid out of the consolidated fund of state.
- Municipal revenue in India accounts for only one percent of the GDP (2017-18) Compared to 7.4% in Brazil and 6% in South Africa. This leads to a dependence on transfers by the state and central government.
- ULBs in states like Uttar Pradesh, Uttarakhand, Bihar, Jharkhand, Rajasthan, and Haryana are in poor financial condition. This has been attributed to limited powers to raise revenue and levy taxes, and problems in the management of existing resources. For instance, the finances of Bihar’s ULBs were assessed to be poor because of: (i) delays in release of grants, (ii) inadequate devolution of funds, and (iii) delays in revision of tax rates and assessment of landholdings
- In comparison, Karnataka ranks high among Indian states in key indicators for fiscal capacity like collection of property taxes, grants from Central Finance Commissions, and state government transfers.
- ULB can choose to finance through special purpose vehicles and state-pooled finance entities,” the report said. For example, China’s Local Government Financing Vehicle (LGFV) is an investment company that sells bonds in the bond markets for financing real estate development and other local infrastructure projects.
Excessive State Control:
- State control which is legislative, administrative, judicial and financial keeps urban municipal government quiet subservient units of local administration rather than functioning as institution of self-governance. The state governments have the power to supersede and dissolve municipal bodies under certain circumstances.
- The state governments approve municipal budget (except that of corporation). Even the modified local tax structure needs government’s prior approval and later ratification.
- The accounting and audit system gives enormous powers to the government to exercise control through rules and regulations
Multiplicity of Agencies:
- The illustrations are- state transport corporation, state electricity board, water supply department etc. have been taken out of the jurisdiction of the urban local government and they function under the direct supervision of the state government and without any accountability towards urban local government. The functions that have been assigned to them belong really to the elected urban bodies.
Sub-standard Personnel:
- These include overstaffing of untrained manpower, shortage of qualified technical staff and managerial supervisors, and unwillingness to innovate in methods for service delivery.
